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The Gujarat High Court, in Jorss Bullion Private Limited v. Income Tax Officer Ward 2(1)(2), has quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961, together with the consequential assessment order and demand notice. The Division Bench comprising Justice A.S. Supehia and Justice Vaibhavi D. Nanavati delivered the judgment on 31 July 2026 in R/Special Civil Application No. 23191 of 2019. The case concerned the applicability of the deemed dividend provisions under Section 2(22)(e) and the validity of reopening an assessment beyond four years.
Background of the Dispute
For Assessment Year 2012-13, Jorss Bullion Private Limited had filed its return declaring income of ₹1,64,59,510. The return was selected for scrutiny, and after examination of the company’s computation, audited balance sheet and audit report, an assessment under Section 143(3) was completed on 23 March 2015.
Nearly four years later, the Assessing Officer issued a notice dated 29 March 2019 under Section 148 alleging escapement of income. The reopening was based on transactions involving Amber Enclaves Private Limited and a common shareholder, Pushpak Realities Private Limited.
The reasons recorded for reopening proceeded on the basis that Pushpak Realities held 90% of the shares in the assessee company and 49.88% in Amber Enclaves. Jorss Bullion specifically disputed this factual premise and pointed out that Pushpak Realities held only 4.60% in the petitioner company, rather than 90%. The company also relied upon judicial precedents governing Section 2(22)(e), including CIT v. Ankitech (P.) Ltd. and CIT v. Daisy Packers P. Ltd.
Deemed Dividend Under Section 2(22)(e)
A significant aspect of the case was whether the loan or advance received from Amber Enclaves could be treated as deemed dividend in the hands of Jorss Bullion.
The petitioner pointed out that it was not a registered shareholder of Amber Enclaves Private Limited. Accordingly, it contended that an advance made by Amber Enclaves to an entity which was not its shareholder could not be taxed as deemed dividend in the hands of that recipient under Section 2(22)(e).
The High Court relied upon the principles laid down by the Delhi High Court in Ankitech and reiterated by the Gujarat High Court in Daisy Packers. The Court noted that the deeming fiction contained in Section 2(22)(e) enlarges the meaning of “dividend”, but does not correspondingly enlarge the meaning of “shareholder”.
The Court further observed that the prescribed shareholding conditions for invoking Section 2(22)(e) were not satisfied in the present case. In particular, the Revenue did not dispute that Pushpak Realities held only 4.60% in Jorss Bullion, which was below the statutory threshold considered by the Court.
Reassessment Beyond Four Years
The High Court also examined the validity of reopening under the then applicable proviso to Section 147.
The original assessment had already been completed under Section 143(3). Therefore, reopening beyond four years from the end of the relevant assessment year required the Revenue to establish that income had escaped assessment because of the assessee’s failure to fully and truly disclose all material facts.
The Court found no such failure.
The assessee had already disclosed its shareholding pattern, audited financial statements and information relating to Amber Enclaves during the original scrutiny proceedings. The relevant material was therefore already available before the Assessing Officer. The Court consequently held that the reopening beyond the statutory period was contrary to the requirements of Section 147.
Settled Judicial Precedents Could Not Be Ignored
Another important feature of the judgment was the Assessing Officer’s failure to deal with the precedents specifically cited by the assessee.
Jorss Bullion had relied on Ankitech and Daisy Packers in its objections to reopening. However, the assessment order did not address those judgments.
The High Court observed that the earlier reference concerning Ankitech to a Larger Bench of the Supreme Court ultimately did not result in a decision overruling the legal principle laid down therein. The proceedings were subsequently withdrawn and dismissed, while the Gujarat High Court had itself followed Ankitech in Daisy Packers.
Alternative Remedy Did Not Bar the Writ Petition
The Revenue argued that the petitioner should pursue the statutory appellate remedy under Section 246A instead of invoking Article 226.
The High Court rejected this objection in the circumstances of the case. It held that the matter fell within recognised exceptions to the rule of alternative remedy because the impugned action was contrary to settled legal precedent and the reopening itself was beyond the statutory limitation without any failure by the assessee to disclose material facts.
The Court also noted that the operation of the assessment order had remained stayed since December 2019 and that more than seven years had elapsed.
Final Decision
The Gujarat High Court allowed the writ petition and quashed the notice issued under Section 148, along with the consequential assessment order and demand notice.
The judgment reinforces two significant principles in income-tax litigation: the deeming fiction under Section 2(22)(e) cannot be expanded beyond its statutory requirements, and an assessment completed after scrutiny cannot ordinarily be reopened beyond four years in the absence of failure by the assessee to make a full and true disclosure of material facts.